It seems that every few weeks, I’m seeing another round of viral “news” stories about how Uber gouged their passengers with surge pricing. Surge pricing, for those who are unfamiliar (aka everyone who complains about Uber’s fares), is a multiplier that gets tacked on to the normal rates during high-demand times. Since Uber isn’t a cab company per se, and as a result can’t force its drivers to pick up fares, it incentivizes its drivers during peak-traffic times by upping the fares. Users are notified of what their multiplier will be, and have to accept it before they can get a ride.
The upside is that Uber can deploy a driver to you, even when demand is high. The downside is that your ride may become quite expensive. People have complained that this model preys on the intoxicated and impaired, who may not fully realize just how much their final cost is going to be. This, of course, is nonsense, since these same people have the option to wait for a cab if they don’t want to deal with surge pricing.
This issue reached a new level this week, however, during the Sydney hostage crisis. Reports of Uber charging people extra to flee the area was met with expected outrage as people blasted the company for seeming to callously take advantage of a terrible situation. The company has since issued refunds for many of these rides in what might otherwise have been a classy move had it not clearly been an effort to mitigate the PR backlash.
…how many do you think would say, “screw that, I’m not going in there for a few bucks”?
But there are two sides to the coin, and for every person trying to get a ride, there has to be a driver willing to enter a chaotic and potentially dangerous area. Since these drivers are typically your “average Joe”, how many do you think would say, “screw that, I’m not going in there for a few bucks”? I’m willing to bet the answer is somewhere between “a lot” and “the vast majority”. So what power does Uber have to get their drivers to go and pick up users? Sweeten the pot, of course.
Ultimately, Uber functions as an auction of sorts between drivers and riders. The difference is that Uber handles the entire bidding process for both parties, and that lack of control and transparency is likely what riles people up. If Uber wasn’t involved and instead you called up a random guy and said, “hey there’s some crazy stuff going on down here, I’ll pay you $20 to get me out of here”, the guy might say no. Maybe after a few minutes, the two of you would settle on a mutually agreeable price (say, $100). Even if that was the same price you’d have paid with Uber, you feel good about it because you had a sense of control.
This is the line that Uber will have to walk, and one that will ultimately determine its long-term viability. Uber isn’t trying to position itself as just another cab company, because waiting for a cab can be a half-hour process in some cases. But that efficiency comes with a price, both in dollars and in autonomy. People have the option to ignore Uber altogether, yet instead they choose to complain. The saddest part is that Uber’s model makes a lot of sense if you think about it from both sides, and it presents a fresh and unique approach to an old problem. If it dies because people can’t wrap their heads around the change, it will be a disappointment indeed.
As an aside, I want to say that the hostages and their families are in our thoughts. Ultimately, terrorism is a far more important issue than a few dollars one way or another. Our sincerest condolences go to the families of the two hostages who lost their lives in this tragedy.